Chicago Mayor Cautious on Bally’s Permanent Casino Property

Posted on: June 10, 2024, 06:12h. 

Last updated on: June 10, 2024, 06:12h.

Bally’s (NYSE: BALY) is coming off an impressive revenue showing in May at its temporary Chicago casino and is slated to start construction on the permanent gaming venue at the Freedom Center in the River West section of the city next month. Mayor Brandon Johnson (D) said that project coming to fruition isn’t guaranteed.

Brandon Johnson
Chicago Mayor Brandon Johnson (D). He’s restrained in his views about Bally’s casino in the city being completed. (Image: Chicago Sun-Times)

In a recent interview with editorial board of the Chicago Sun-Times editorial, Johnson made comments suggesting that Bally’s has a lot on its plate, including attempting to solve an $800 million funding shortfall in the city. That need for financing is among the reasons why the mayor cannot definitively say whether or not the casino hotel will make it across the finish line.

I wish I could say something definitive today. I know our team is working with ownership to figure it out like we figured out some of the other things that I’ve inherited. It just has to make absolute sense … I think that one’s still to be determined, to be perfectly frank with you,” Johnson told the Sun-Times editorial board.

Bally’s has a $500 million credit facility in place, and that it’s used $250 million of that sum for land at the Freedom Center, which was the prior home of the Chicago Tribune.

Bally’s Takeover Bid Could Cloud Chicago Plans

Bally’s was awarded the lone Chicago casino permit in May 2022 by former Mayor Lori Lightfoot — a move that was widely criticized, including allegations of corruption that some market observers believed quashed a competitive bidding process.

That’s not the end of Bally’s potential headwinds in the Wind City. Earlier this year, Standard General — the hedge fund controlled by Bally’s director Soo Kim — offered $15 a share to acquire the regional casino operator. The bid is still under consideration, but at least one investor cautioned that if the offer is accepted, it could jeopardize the Chicago project.

Kim claims otherwise, but following recent downgrades to Bally’s credit rating by all three major ratings agencies, access to financing is likely to come with higher interest rates. Those higher rates would create elevated interest expense for Bally’s, putting burden on the Chicago integrated resort to meet or exceed profit and revenue expectations.

If the operator commences construction as planned in July, the target date for opening is September 2026.

Other Issues Confounding Bally’s in Chicago

There’s another major issue Bally’s is contending with in the third-largest US city. There still isn’t a clear decision regarding where on the Freedom Center property the hotel will be located.

To much derision of the city and the gaming company, it was revealed earlier this year that the original location of the hotel wasn’t tenable because construction on that portion of the property would damage underground water pipes.

The hotel is an essential component in Bally’s Chicago casino and could command a significant percentage of the $1.34 billion the operator is legally bound to spend in the city. There’s still $1.1 billion left on that tab, according to the Sun-Times.


Source link